A shareholders' agreement (pacte d'actionnaires) is a contract concluded between all or some of the shareholders of a company to organise their relationships and frame corporate life beyond what the articles of association provide. Under Swiss law, it is governed by the principle of freedom of contract (art. 18 CO) and usefully complements the articles to address matters that the founders do not wish to make public. PBM Avocats drafts and negotiates bespoke shareholders' agreements for Geneva and Vaud companies, from start-ups to international groups.
Why is a Shareholders' Agreement Indispensable?
The articles of association are a public document, accessible to any third party via the commercial register. They cannot address all situations likely to affect shareholder relations. The agreement, by contrast, is a confidential document that allows complex mechanisms to be organised:
- Organisation of governance and nomination rights to corporate organs
- Control of shareholder composition and entry of third parties
- Planning of exits (sale, IPO, liquidation)
- Protection of minority investors
- Organisation of decision-making and deadlock resolution
- Non-compete and confidentiality obligations
Share Transfer Clauses
| Clause | Mechanism | Primary Beneficiary |
|---|---|---|
| Pre-emption right (right of first refusal) | Right to acquire shares being sold before any third party, on same terms | Existing shareholders |
| Right of first offer | Mandatory offer to co-shareholders before dealing with third parties | Existing shareholders |
| Tag-along (co-sale right) | Minorities may sell their shares on the same terms as the majority | Minority shareholders |
| Drag-along (compulsory transfer) | Majority can compel minorities to sell on the same terms | Majority shareholders / acquirer |
| Lock-up | Prohibition on transferring shares for a specified period | Company / investors |
Governance Clauses
Shareholders' agreements often include governance provisions:
- Nomination rights: each shareholder group nominates a certain number of board members proportional to their stake
- Veto rights: certain important decisions require unanimous consent or a qualified majority
- Reserved matters: list of decisions subject to specific approval (budget, disposal of assets, M&A, new financing)
- Deadlock mechanisms: procedures for resolving shareholder impasses (Russian roulette, shoot-out, buy-sell)
- Information rights: management accounts, access to financial data
Frequently Asked Questions about Shareholders' Agreements
Is a shareholders' agreement enforceable against third parties?
No. A shareholders' agreement is a private contract binding exclusively on its signatories (art. 18 CO). It is not enforceable against third parties, particularly good-faith purchasers of shares who were unaware of it. This is why share transfer restriction clauses intended to have absolute effect must be incorporated into the company's articles of association (arts. 685a et seq. CO for AG/SA). The agreement and the articles are therefore complementary instruments.
What is a drag-along clause and how does it work?
A drag-along clause (compulsory transfer clause) requires minority shareholders to sell their shares on the same terms as the majority shareholders when the latter conclude a sale of all or a qualified majority of the company's shares. It protects potential buyers who wish to obtain 100% of the share capital. In exchange, the articles or agreement generally provide for a minimum sale price or valuation procedure to protect minorities. These clauses are common in structures with investors and in the context of mergers and acquisitions.
What is the difference between a pre-emption right and a right of first offer?
A pre-emption right (right of first refusal) gives its holder the right to acquire a co-shareholder's shares before they are offered to a third party, on the same terms as those proposed by the third party. A right of first offer is stronger: the shareholder wishing to sell must first offer their shares to the other shareholders at a price they set themselves, before being able to deal with third parties. Both mechanisms aim to control shareholder composition.
Is a non-compete clause in a shareholders' agreement valid?
Yes, subject to compliance with the validity conditions set out in art. 340 CO (applicable by analogy): the clause must be limited in time (generally 2 to 3 years after exit), in space (specific geographical territory) and in its scope (specific competing activities). An overly broad clause would be reduced by the court to reasonable proportions (art. 340a para. 2 CO). It is also recommended to provide for a non-compete indemnity to reinforce its validity and enforceability.
What happens if a shareholder breaches the shareholders' agreement?
Breaching a shareholders' agreement engages the contractual liability of the defaulting party (art. 97 CO). The aggrieved party may claim damages. However, acts performed by the defaulting shareholder in breach of the agreement (for example a transfer of shares to a third party without respecting the pre-emption right) remain in principle valid vis-à-vis a good-faith acquirer. To strengthen the agreement's effectiveness, it is recommended to provide for penalty clauses (art. 160 CO), forced buy-out mechanisms or veto rights over company decisions.